If you’re interested in property investment, but don’t know quite where to start, then it’s wise to learn about the different options available to you.
There are two main types of property investment:
- Buying to sell at a later date for a profit
- Buying to rent out as a means to generate regular income
Each has its own benefits, and many investors choose to have a diverse portfolio that includes both.
Here, we’re going to lay out the pros and cons for both ‘buy-to-sell’ and ‘buy-to-let’ – hopefully providing you with some valuable insight into how it all works.
Note – We are not offering financial advice. Cogress is an expert in property investments. Please seek an independent financial advisor before making any decision regarding property investments.
Buy-to-let investment properties
Buy-to-let means that you invest in a property, and then let it out to a tenant or tenants, normally for a monthly rental fee.
During this time you will still maintain ownership over the property.
As long as somebody is paying you to rent your property, you will always have a regular income. The tricky part can be ensuring you regularly have a tenant. If a tenancy agreement ends, and you don’t replace it with a new one straight away, then you’re losing money.
Make More Money
If you’re making a profit every month, then eventually you’re going to breakeven on your investment. After that, you can continue to rent out the property and earn even more money. There’s no limit to how much you can make, as long as you have a tenant, your income should be sustained.
Being a Landlord
If you decide to become a landlord, you will still need to spend time, energy – and sometimes money – on managing the property.
If there is a problem with the property’s plumbing or wiring, then the landlord is ultimately responsible for fixing that issue. Likewise, as the landlord you will need to ensure that you always have a tenant living in the property. This means advertising, meeting potential tenants and ensuring you meet all the terms of an agreement.
Of course, you can always hire an agency to manage all of this for you, but this leads to…
Estate agents cost money, which means your profit margins will be down and breaking even on your investment will take longer.As mentioned, you may also need to spend money on maintaining the property. If it needs a new boiler, for example, then you will be required to cover this expense.
Furthermore, HMRC will require you to pay income tax on the profits you make as a landlord. You can sometimes write off expenses for things such as repairs and management, but it is still an additional cost to be aware of.
While there is no limit on how much you can earn by renting out your property, it is very much a long-term strategy. If you’re looking to make quick cash, then this isn’t the option for you. It will take a while for you to break even – and it may not even happen at all.
Buying-to-sell investment properties
Buying-to-sell means that you purchase a property and then sell it at a higher value – normally within a year or two.
Once you have sold the property, you will no longer have any control over it.
Sell for a Profit
If all goes well, you can sell your property shortly after investing and make a sizeable profit.
It’s a much faster way of earning money than ‘buy-to-rent’, with the right buyer you could earn more instantly than you would in several years of acting as a landlord.
Rising Property Prices
It’s true that property prices in the UK can fluctuate quite frequently. But in the long-term, a property will likely be more valuable than it is today.
Sell and Forget
Once you’ve sold your property, you do not need to concern yourself with it anymore.You don’t need to worry about maintenance costs, constantly ensuring a tenant is occupying the property, dealing with difficult tenants, whether or not you’re going to breakeven on your investment – or even hiring an agency to do all of this for you.
The Risk Involved
There is no guarantee that you will see a return on your investment. It is possible that you will lose every penny you spend. If you don’t feel as if you can make this decision, consult an independent financial advisor.
Read the Cogress full risk warning for more information.
If you are interested in buy-to-sell, then consider the Cogress platform. Come together with a community of investors, who are all interested in property development. We vet all of our developers and investors, and match each party to a project suitable for them.
Registration for Cogress is completely free – and you’ll have access to our unique portal. By registering, you are under no obligation to proceed with any investments.